Markets

Why DiamondPeak Holdings Stock Just Dropped 10%

What happened

Shares of DiamondPeak Holdings (NASDAQ: DPHC), the special-purpose acquisition company (SPAC) that intends to take electric-vehicle (EV) maker Lordstown Motors public later this year, are in the dumps today, down 10% as 11:45 a.m. EDT.

And I think you can blame Jim Cramer for that.

Falling stock charts superimposed over digital map of the world

Image source: Getty Images.

What happened

Responding to a viewer inquiry during his daily "Mad Money Lightning Round" on Monday, the CNBC commentator weighed in on DiamondPeak's prospects, warning, "This is an EV SPAC, now we saw what happened with some of the EV SPACs." He recommended the caller trim their exposure to DiamondPeak stock -- selling half, and keeping half.  

Investors appear to be rattled by Cramer's negative assessment.

So what

Rightly or wrongly, though, I don't think the selling will last.

Why not? Consider that in its announcement of its plan to take Lordstown Motors public last month, DiamondPeak told investors that it expects the company, which will list on the Nasdaq under the ticker symbol "RIDE," to come public with a pro forma valuation of $1.6 billion. DiamondPeak stock has a market capitalization of less than $1 billion today, though, that implies a further upside of 60% in the stock when it comes public -- and this is supposed to happen before the end of this year.

Suffice it to say that I think investors will find the prospect of a 60% profit in under three months too good to resist. Whether the stock actually gets there is an open question, but I expect the gamblers to return soon after Cramer stops shooing them away.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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